Saturday, November 19, 2016

TLH Market Review 11/19/16

"That's two weeks" - TLHI
"Two weeks of what?" - You
"Two weeks of post-election market highs even though the world was supposed to end" TLHI

Yep that's right! Two weeks of new highs even though the "smart" people at Goldman Sachs with a huge research budget, and boat loads of MBA's from Ivy League schools all said a Trump victory would be bad for the market.  I hate to get political but they were backing HRC the entire time so take their word with a massive grain of salt. That's why there is the phrase "Follow The Money"

With the Dow Jones and Russell 2000 climbing into uncharted territory it's only a matter of time before the S&P 500 and Nasdaq follow.  My guess is we'll see it by year end, or by February at the latest. The line won't be straight up, but it will be up.  

Either way the last few weeks have seen a lot of change within the market.  Financials and Industrials have been leading the rotation with respective gains of 13.7% & 7.17% the last month.  Meanwhile Utilities and Real estate have taken a beating as each are down -4.4% & -6%.
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These aren't the only areas seeing massive moves. Small caps have been on fire as the Russell 2000 has surged over 13% the last couple weeks and now sports a 16% YTD gain. 

It's crazy how quickly things can change as investors are now flocking into cyclical and riskier assets.  At the beginning of this year investors were clamoring for utilities, real estate, telecom, and staples as the market see-sawed all over the place. Many back then were calling for a recession and a crash in stocks. We did see some dangerously low growth, but it seems the worst was avoided. 

Bonds and Gold have also had some divergent paths as big money re-positions.  The 10 year yield has soared 50bps to 2.34%, and safe haven gold has seen its price drop from $124 to $115.
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I think it's safe to say risk and inflation trades are back on. 

Speaking of inflation we did get CPI this week which showed a 0.4% rise for October. That's a good number. The markets pretty much think it's a lock for the Federal Reserve to raise rates in December. This has been the most widely broadcast rate hike in recent history so it shouldn't be a surprise. Either way the market has rate hike odds at 95.4% now. 

The portfolio had no earnings. We did get a statement from Hain Celestial(HAIN) that their investigation into their revenue recognition found no intentional or inappropriate actions. That was good enough for the stock to pop 10% on the news. Remember I sold part of the shares out of the portfolio on the news release.  I still don't want to buy back in.  Maybe that will turn out to be a mistake as I do think the company trades at a nice value right now.  Either way I don't like getting burned.

I was very close to cutting ties with CTSH too, but they were very clear upfront that improper payments were made. These are two separate issues which have to be looked at individually.  Either way it looks like I made the right calls so far.

Have a great weekend!

The Long Haul Investor

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